> AT&T didn't sell you generic fungible data. Because you are a nerd on a nerd site, you're natively inclined to determine that any connectivity is generic connectivity, measured and priced only by $/bps. But $/bps isn't a product AT&T sells with generic iPhone plans.
I didn't say that they did. I said that they would have to IF the FCC had included wireless telecoms in its net neutrality rules.
> There are not that many of you, and you are uniformly wealthier than most other segments of AT&T customers. Finding a way to charge you for that behavior is marketing 101.
So they are charging based on what the market will bear, not based on their costs. This is symptomatic of a lack of competition in the industry (which is the cause of most of these problems in the first place). Price discrimination is not possible when there is competition.
Cost-based pricing is symptomatic of commodity markets, like gypsum. Most everything that isn't a commodity is priced according to the market. Is the disagreement here that you think wireless Internet is gypsum, and I think it's canned tomatoes?
Competition and cost-based pricing are entirely orthogonal issues. There is intense competition in the market for (say) beer, but it takes the form of a marketing dogfight of changing product attributes and highlighting instead of race-to-the-bottom pricing.
> Is the disagreement here that you think wireless Internet is gypsum, and I think it's canned tomatoes?
You're missing the point. It's not like you can change the fact that telecoms (with current technology) tend towards a natural oligopoly. All you can do is rein in their market power via legislation.
> Competition and cost-based pricing are entirely orthogonal issues.
Not at all. Fundamental economic theory states that in a pure monopoly, sellers have the ability to set the prices, so they can price discriminate and charge each customer the maximum he will pay. In pure competition, the price will eventually reach the marginal cost.
Cost-based pricing isn't symptomatic of commodity markets. Cost-based pricing and commodity markets are symptomatic of pure competition.
> There is intense competition in the market for (say) beer, but it takes the form of a marketing dogfight of changing product attributes and highlighting instead of race-to-the-bottom pricing.
You're conflating the competition's intensity and perfection. As with beer, there's also intense competition among telecoms ("Only the AT&T iPhone lets you talk and browse the web at the same time", "Verizon has 5x better coverage than AT&T"). That doesn't change the fact that there's an oligopoly (both in beer and in telecoms). The fact that the products are not homogenous across the market further emphasizes this.
I don't think the issue is cost-based pricing vs arbitrary pricing. It's rather charging for providing additional value vs charging for not imposing artificial limits. The second one makes people feel gyped.
Comments
> AT&T didn't sell you generic fungible data. Because you are a nerd on a nerd site, you're natively inclined to determine that any connectivity is generic connectivity, measured and priced only by $/bps. But $/bps isn't a product AT&T sells with generic iPhone plans.
I didn't say that they did. I said that they would have to IF the FCC had included wireless telecoms in its net neutrality rules.
> There are not that many of you, and you are uniformly wealthier than most other segments of AT&T customers. Finding a way to charge you for that behavior is marketing 101.
So they are charging based on what the market will bear, not based on their costs. This is symptomatic of a lack of competition in the industry (which is the cause of most of these problems in the first place). Price discrimination is not possible when there is competition.
Cost-based pricing is symptomatic of commodity markets, like gypsum. Most everything that isn't a commodity is priced according to the market. Is the disagreement here that you think wireless Internet is gypsum, and I think it's canned tomatoes?
Competition and cost-based pricing are entirely orthogonal issues. There is intense competition in the market for (say) beer, but it takes the form of a marketing dogfight of changing product attributes and highlighting instead of race-to-the-bottom pricing.
> Is the disagreement here that you think wireless Internet is gypsum, and I think it's canned tomatoes?
You're missing the point. It's not like you can change the fact that telecoms (with current technology) tend towards a natural oligopoly. All you can do is rein in their market power via legislation.
> Competition and cost-based pricing are entirely orthogonal issues.
Not at all. Fundamental economic theory states that in a pure monopoly, sellers have the ability to set the prices, so they can price discriminate and charge each customer the maximum he will pay. In pure competition, the price will eventually reach the marginal cost.
Cost-based pricing isn't symptomatic of commodity markets. Cost-based pricing and commodity markets are symptomatic of pure competition.
> There is intense competition in the market for (say) beer, but it takes the form of a marketing dogfight of changing product attributes and highlighting instead of race-to-the-bottom pricing.
You're conflating the competition's intensity and perfection. As with beer, there's also intense competition among telecoms ("Only the AT&T iPhone lets you talk and browse the web at the same time", "Verizon has 5x better coverage than AT&T"). That doesn't change the fact that there's an oligopoly (both in beer and in telecoms). The fact that the products are not homogenous across the market further emphasizes this.
I don't think the issue is cost-based pricing vs arbitrary pricing. It's rather charging for providing additional value vs charging for not imposing artificial limits. The second one makes people feel gyped.